- See more at: http://www.iamagazine.com/news/read/2015/07/28/what-the-u.s.-supreme-court-same-sex-marriage-ruling-means-for-p-c-insurance#sthash.GaixM8zj.dpuf
On June 26 in Obergefell v. Hodges, the U.S. Supreme Court ruled in favor of same-sex marriage in a 5-4 decision.
What does the ruling mean for you and your customers? And what are the property-casualty coverage implications?
As always, you need to review the specific policy in question to determine how it addresses terms like “marriage,” “spouse” and “family member.” If it’s not an ISO form, hopefully the underwriting carrier has considered the implications and can provide guidance.
But for ISO forms, here’s what you should keep in mind in the aftermath of the Supreme Court ruling:
ISO Personal Auto Policy (PAP)
The words “you” and “your” appear 141 times in the 13 pages of the 2015 edition of the ISO PAP. ISO defines these terms to mean the named insured on the Declarations and, even if not named, the spouse if a resident of the same household. The term “spouse” appears in the policy seven times, and although it is undefined in the insurance contract, the highest court in the land has established that same-sex couples qualify as “spouses” and are therefore entitled to the insured status of “you” and “your”—even if not specifically named on the policy.
As always, it is advisable to name both spouses. “You” has rights under the policy no other insured has, including the right to request changes, cancel coverage, receive return premiums and more, so who is a “you” is critically important.
The ISO PAP also uses the term “family member” 26 times, which refers to a person related to “you” by blood, marriage or adoption who is a resident of your household, including ward or foster children. This is significant because after “you,” “family members” enjoy the “second best” coverage in the policy. So the child of an unnamed same-sex spouse residing in the household now has “family member” status when it comes to coverage.
ISO has too many PAP endorsements to analyze for an article of this type. But a good example of the impact of the ruling on PAP endorsements is the PP 03 34 – Joint Ownership Coverage endorsement—a form that can cover the exposures of jointly owned vehicles between: 1) individuals “other than husband and wife” residing in the same household, or 2) non-resident relatives. ISO will likely revise the “husband and wife” language in its upcoming countrywide PAP filing, since “marriage” is no longer delineated by opposing genders. Presumably, this endorsement will no longer be necessary for same-sex couples living together if legally married, but how ISO plans to address this issue in this and other coverage forms remains to be seen.
From a rating standpoint, policies issued to same-sex married couples may offer some advantages. But that could depend on other issues that will vary from one couple to the next, such as driving records and credit scores, so it’s impossible to predict the rating impact of this change. As outlined in many Big “I” Virtual University articles, insuring all resident family members under one policy is almost always better from a coverage standpoint.
ISO Homeowners Policies
Using the most common policy, the 24-page ISO HO 00 03 05 11 (HO-3) as the model HO form, the terms “you” and “your” appear 114 times and mean the same thing they do in ISO’s PAP. The word “spouse” appears twice, once in the “you” and “your” definitions and again under the “Death” condition. Disregarding any impact on HO endorsements, the ruling should have little impact on HO coverage. Expect the ruling to create a larger issue regarding eligibility and rating.
ISO’s primary CGL policy makes four references to a “spouse.” The first is in the Employer’s Liability exclusion, which applies to business interruption to the spouse of an employee as a consequence of BI to that employee. This exclusion would now apply to a same-sex marriage partner where it presumably did not prior to the Court’s ruling, though establishing a basis for coverage otherwise might have been difficult anyway. The remaining three “spouse” references appear in the “Who Is An Insured” section, where the spouse of a sole proprietor, partner or joint venture member has automatic coverage for claims arising from their conduct on behalf of the business. This would be an expansion of coverage for same-sex spouses.
ISO’s Business Auto Policy (BAP) also includes a reference to “spouse” in the Employer’s Liability exclusion, on the same basis as the CGL policy. In addition, the “Fellow Employee” exclusion for consequential losses includes mention of a “spouse.” The result of these two references: A same-sex spouse would clearly not have coverage for an exposure they would have had coverage for before if there was a basis for recovery under the policy. This change may affect a number of BAP endorsements, from UM and PIP to other forms such as the CA 99 10 – Drive Other Car Coverage and CA 99 17 – Individual Named Insured endorsements. The changes to these forms are similar to ISO’s PAP changes with regard to references to “spouse” and “family member.”
These are just a few examples of how the Supreme Court ruling may impact p-c coverages. Once again, it is important to review each policy form on its own merits and discuss any issues with the carrier regarding eligibility, rating and coverage.
Note: If you are interested in an opinion piece about the implications of this ruling on life-health insurance, income, estate and gift tax issues, social security benefits and retirement accounts, check out LifeHealthPRO’s article “What the same-sex marriage ruling means for insurance agents.”
Bill Wilson is director of the Big “I” Virtual University.